AWE receives rival bid to second Chinese takeover offer

Jan. 8, 2018
AWE Ltd., Sydney, has received a rival bid to the second China Energy Reserve & Chemicals Group (CERCG) offer that was lodged on Dec. 8.

AWE Ltd., Sydney, has received a rival bid to the second China Energy Reserve & Chemicals Group (CERCG) offer that was lodged on Dec. 8.

The new entrant in what is becoming a bidding war for AWE is Perth-based mining and mining services group Mineral Resources Ltd. (MinRes), the company which earlier this year acquired fellow Perth firm Empire Oil & Gas NL.

MinRes has made an all-scrip offer of 80¢ (Aus.)/share for AWE, which outstrips the $463 million (Aus.) cash offer from CERCG by 7¢/share and values AWE at $507 million (Aus.). The offer came after close of trading on Dec. 8.

MinRes is asking for AWE board recommendation for its scheme of arrangement, which offers AWE shareholders one share of MinRes for every 22.325 shares they hold in AWE. If successful, it would result in AWE shareholders owning about 13% of the combined group.

The offer is not conditional on due diligence presumably because MinRes is familiar with the onshore Perth basin and AWE's key Waitsia gas field through its connection with Empire Oil & Gas and acquisition of Empire's nearby Red Gully gas processing plant and surrounding exploration permits.

MinRes said the bid for AWE is in line with its clean energy strategy of securing gas assets to vertically integrate the energy supply chain. This includes the use of LNG plants to provide power solutions to a wide range of end users.

CERCG made its second, upward revised takeover offer for AWE following its withdrawal of the first bid earlier last week.

The new all-cash bid of $463 million (Aus.) is for 73¢/share, which is 2¢/share above its previous offer.

This represents a 33% premium to AWE's trading price of 54¢ on Nov. 29-the day before the initial offer was made. It is however only 12% above AWE's Dec. 8 trading price of 65¢.

Directing comments to AWE shareholders, CERCG said the new bid was a very full and fair offer. The company said it had been in talks with AWE since October and had been encouraged to make the takeover proposal by AWE shareholders.

A CERCG spokesman said shareholders were upset that they were not able to consider two previous respective offers from Senex and Lone Star in 2013 and 2016. He added that AWE has consistently failed to deliver acceptable shareholder returns.

CERCG said it raised the bid to 73¢ because of the expected increase in gas reserves at AWE's Waitsia gas project in the onshore Perth basin of Western Australia to more than 500 petajoules.

CERCG outlined what it believes are the challenges ahead if the revised bid is not accepted but did acknowledge the Waitsia field has potential to provide value for AWE shareholders in the long term. It said this was the reason for offering what it called a substantial premium. CERCG added that if it were to make a successful acquisition of AWE its focus would be on supplying gas to the domestic market starting with mining areas and remote communities in Western Australia and, perhaps later, on Australia's east coast, although that would depend on pipeline and other transportation systems.